1 Introduction
Raising capital and decide on capital structure still seems to be puzzle. Still, much research has been devoted to investigating the issue, and there are theories that have been developed to try to explain company-financing behavior. There is especially a lot of research that tackles this by applying trade-off theory (TOT) and pecking order theory (POT) assumptions. The results, however, of extensive attempts leave us with no consistent answer.
The lack of consensus on a theory that might explain financing decisions was a trigger to bring

line with citizens’ preferences. I analysed the preference-matching using the information about the structure of local society. The median voter model suggests that when there are more citizens in a municipality that demand cultural services more, the spending on culture is higher. The second group of variables defines the financial condition of the municipality. The revenues of the municipality and also the fiscal imbalance indicator are included in this group. This indicator represents the differences in the real elasticity of local fiscal policy. The third group

presented a number of arguments for differential taxation, we are still far from fully understanding what the main determinants of the direct to indirect tax mix are ( Martinez-Vazquez, Vulovic and Liu 2011 , 38). So far, however, the main focus of the literature has been put on the effects of the structures composed of labour and consumption taxes, and on a possibility to substitute one for another in order to increase welfare. Yet, to be efficient, an increase in the labour tax requires a low elasticity of labour income and remains unpopular for social and political

limited access to external financing, companies invest less, do not use the leverage and grow slower ( Rajan and Zingales 1995 ). External financing also has its disadvantages. Often, the possibility to obtain financing in the form of debt requires establishing security or a warranty. When the company is in a weak or deteriorating financial situation, creditors require additional security. Trade-off theory ( Kraus and Litzenberger 1973 ), also known as the theory of substitution, envisages the optimal capital structure for every company when the marginal current value

(1995) , Melitz (2003) , Asplund and Nocke (2006) , and Foster et al . (2008) . This finding has shaped research agendas in a number of fields, including industrial organization, labour economics, and international trade. In the industrial organization literature, productivity levels are linked to demand, market structure and a number of features of technology. The frequently cited examples include the effects of competition ( Syverson, 2004 a; and Schmitz, 2005 ), sunk costs ( Collard-Wexler, 2013 ), as well as the interaction of product market rivalry and

administration. Moreover, military-controlled land, hardware, testing grounds, transport vehicles, housing and training centres are large and provide further opportunities for corruption ( Gupta et al., 2001 ). In our model, even if we control for corruption, the coefficient of military expenditures remains significant. This means that there is also a direct link between military expenditures and shadow economy.
The rest of the paper is structured as follows: In the next section, we discuss the data used in the model and methodology. Section 3 presents the results of the